[fn Editorial] Announcement of '9.7 Real Estate Measures', the issue is the speed of supply execution

The government announced on Sunday, the 7th, that 1.35 million new housing units will be started in Seoul and the metropolitan area by 2030. This is the second real estate measure following the '6·27 Household Debt Management Strengthening Plan' announced shortly after the inauguration of the Lee Jae-myung government. Koo Yoon-cheol, Deputy Prime Minister and Minister of Economy and Finance, said, "We will manage based on 'construction start' volume that leads to actual occupancy, not just permit numbers as in the past, and ensure execution."

The government's plan is to supply an average of 270,000 units per year over the next five years based on the 'construction start' standard. This means supplying more than the total 200,000 units of the third new city announced by the Moon Jae-in government on September 21, 2018, every year. It seems like a huge plan at first glance, as it aims to start and supply the equivalent of one new city every year. The issue is the speed of execution and the actual impact on the real estate market.

The previous Yoon Seok-yeol government also announced the '8·16 Measures' in 2022 to supply 2.7 million units nationwide by 2027, as housing prices soared. The supply volume for Seoul and the metropolitan area alone was 2.08 million units, more than the volume announced that day. However, the impact on the market was minimal, failing to curb housing prices.

The '9·7 Measures' announced that day also seem to supplement the 8·16 Measures. The only difference is the construction start standard, and the completion time is actually delayed by three years. Although it is said to be based on the construction start standard, it is uncertain whether such a volume can actually be started without delay. The government's announcements and execution speed have always differed. The third new city, for which candidate sites were announced only in February 2021, is delayed to the extent that some areas have not even established district unit plans.

For the supply measures to have a substantial effect in the market, two things must be ensured. One is the speed of project execution. If it takes more than 10 years to complete, like the third new city, the effect is halved. The government must encourage project progress by easing regulations to meet the completion schedule as planned.

The second is to supply where there is demand. If demand is concentrated in Seoul, building many houses on the outskirts of Seoul will not easily control Seoul's housing prices. It is a mismatch of supply and demand. In other words, to control housing prices in Gangnam, Seoul, it is right to supply many houses in Gangnam. The recent surge in housing prices originated in Gangnam. The rise in housing prices that started in Gangnam spread to Seoul and some parts of the metropolitan area.

If so, this measure should have focused on expanding supply in Seoul, including Gangnam. There should have been a concrete plan to increase housing supply in the so-called 'Mayongseong' area, the central part of Gangnam and Seoul, but it is considered insufficient. The key to increasing supply in the Gangnam area is to relax regulations on reconstruction and redevelopment. Reconstruction should allow high-density development by increasing the floor area ratio, and redevelopment should relax requirements to convert villa-dense areas into apartment complexes. Without this, controlling Gangnam housing prices is ineffective.